Shanda Games Ltd. (GAME)

Q3 2011 Earnings Call

November 17, 2011 8:00 PM ET


Ellen Chiu – IR Director

Alan Tan – Chairman and CEO

Richard Wei – CFO


Timothy Chan – Morgan Stanley

Fey Sung – Goldman Sachs

Jet Lee – Citi

Thomas Cheng – RBS

Chao Wang – Merrill Lynch

Jialong Shi – CLSA

Andy Yeung – Oppenheimer

Mark Marostica – Piper Jaffray



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Ladies and gentlemen, thank you for standing by and welcome to the Shanda Games Ltd. 2011 Third Quarter Results Conference Call. The conference call will be recorded and available for replay in its entirety. A copy of the Shanda Games 2011 third quarter results announcement can be found and downloaded from its Investor Relations website, At this time, all lines have been placed in a listen-only mode, and the floor will be open for questions following today’s presentation.

I would now like to turn the call over to Ellen Chiu, Shanda Games’ Investor Relations Director. Please proceed, ma’am. Thank you.

Ellen Chiu

Thank you. Good morning and good evening, everyone. On behalf of Shanda Games, I would like to welcome everyone to our 2011 Third Quarter Results Conference Call. With me today are Mr. Alan Tan, our Chairman and CEO and Mr. Richard Wei, our CFO.

Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations and are intended to qualify for the Safe Harbor from liability for such statements established in the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts during the conference call are forward-looking statements, which are subject to significant risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements. So please do take a minute to read the Safe Harbor statement in Shanda Games’ third quarter 2011 earnings release.

In addition, please note for discussion purposes, all numbers were translated into U.S. dollar based on the exchange rate of RMB6.3549 per U.S. dollar.

Now, I would like to turn the call over to our Chairman and CEO, Mr. Alan Tan.

Alan Tan

Thank you, Ellen and thank you all for joining us today. It is evident from our earnings release Shanda Games had now delivered four consecutive quarters of sequential revenue growth. In the third quarter of 2011 our total net revenues reached historic high, increasing 2.5% quarter-on-quarter and 23.4% year-over-year.

Our solid results, it was profitable that we are having in the right direction and our evolution we are clearly being supported by our strong franchises, strong pipeline, new platform and rising all of the presented. By bringing the mostly innovative and engaging online gaming content along with the mobility to move across our platform. We are developing some of the largest most active online gaming communities in the world. This helps our transition continue to build on the effective implementation of our AAA strategy. As a reminder AAA stands for the three critical elements, All-Star, All-Platform, and All-Region.

Let me start with update on the All-Star components of our strategy. Today more consumers than ever before has been we have and emerging themselves within Virtual Wars and our tremendous game portfolio is certainly driving some of the interest. Our All-Star gaming strategy gives us focus on carrying the best titles through licensing agreements, in-house development and investments in our platform. Of course, whether it is Legend of Immortals or third party games for developing a better rate content. We are very much focused on rolling out promotional activities free games while organizing both out chemical and (inaudible).

In October, we were awarded the Innovative Online Gaming Award and achievement for Outstanding Digital Content Award at the China International Digital Content Exposition. This has reaffirmed our position as an industry leader in both content creation and innovation. I would like to take a few moments to talk in depth about the monetization of the branches in the third quarter. We have exciting games in our pipeline that we have lined up for last quarter of 2011 and first half of 2012. Our all stock strategy is just like our approach to the game business so we tap into new genres that will cater to gamers in China.

In the year-to-date, we are two and we will, were the driving force behind our revenue. The past three quarters have also yielded us strong growth from new games such as AION, Dragon Nest and Legend of Immortals.

Third quarter, Mir II, Woool and the Dragon Nest have contributed 44%, 14% and 13% of total revenue in the third quarter respectively. The quarter-over-quarter increase of Mir II’s contribution is primarily due to the expansion packs released to mark the 11th anniversary of the game.

The quarter-over-quarter decline of Dragon Nest’s contribution was mainly due to a delay in the release of expansion pack from July to late September 2011. During first quarter revenue contribution, however, expanded to grow. Not Monk we began open but it has be very positive yield of feedback aligned with our strategy of building strong long term gains, where our original title by adding new content and improving usability. As a result, industry has managed to recognize original – to return to the game and at the same time return on new generation of users.

Judging by the initial user number we have to day any form of cannibalizing on MIR II and our other 2-D MMO games. Really on the excitement generated by our games at our All-Star event earlier this year we showcased more new titles at the China International DITO conference editable stations in October.

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